How To Find Your Credit Card’s Apr
Your credit card APR may be available in multiple locations: on your most recent credit card statement, in your card’s terms and conditions, on your card issuer’s website, or by reaching out to the credit card issuer directly.
Note that there may be different APRs for purchases, cash advances and balance transfers. Be sure you refer to the correct one when calculating what you owe. When we say “APR” in this article, we’re referring to the APR for purchases.
Find Your Apr On Your Credit Card Statement
Typically, you can find your credit card APR near the end of your monthly statement. There will be a section of the statement marked “Interest Charge Calculation” or a similarly worded section.
The statement section also shows you how much of your balance will be used to calculate your monthly interest charge. Interest accrues every day on any unpaid balance, and the accrued interest becomes part of your total balance. Because your interest compounds, what you owe can grow quickly.
How Does A Credit Card Work
A credit card can be used to make a purchase of goods or services in-person or online. When you apply for and are approved for a credit card, youre given a line of credit based on your credit score. The better your score, the higher the amount of credit youll typically be granted.
A potential advantage to using a credit card over paying cash or a debit card is that a credit card can function like a short-term loan. By using a credit card, youll have until the end of the credit card billing period to pay back from your bank account what you charged to the card. You can also earn rewards like cash back or travel rewards with some types of cards, along with extras like purchase and travel protections. The downside is that if you dont pay the entire amount that you charged to your card, youll accrue interest on your purchases which can be expensive over time.
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Balance Transfer Credit Cards
Once you accumulate a debt load on an existing credit card, the interest will compoundrapidly. Your best bet is to transfer the debt to a balance transfer credit card, which lets you move debt from a high-interest card to one with a lower rate. These cards often offer promotional interest rates for a specific period0% interest for the first 10 months, for examplewhich can buy you time to pay down your balance with little or no interest. Sometimes, even the regular interest rate on a balance transfer card is lower than usual.
Why Rates Are So High
Unsecured loan:;Credit cards are typically unsecured, meaning theres no collateral ;no asset the lender can take if the borrower doesnt pay. Thats as opposed to a secured credit card, which requires an upfront deposit as collateral, or loan for a house or car, which a lender can repossess and resell to get some of its money back. Thats why the bank doesnt give you the title to your car, for example, until you finish paying the auto loan. And unsecured credit card balances are not backed by anybody elses promise to pay, such as the federal government backing some student loans.
Uncertainty:;Unlike with other kinds of loans, credit card issuers dont ask you why you need the money. You can use it to pay for a medical bill or car repair or to play casino blackjack or buy bobblehead dolls. And banks dont know exactly how much youll be borrowing. It could be zero or your maximum credit line. That uncertainty is a risk to the lender.
Profit:;Most card issuers are in business to make a profit for shareholders ;or, in the case of credit unions, funnel profits into benefits for members. Credit card interest revenue helps boost bottom lines and pay for the lucrative benefits of rewards credit cards and 0% periods of balance transfer cards.
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How We Calculate Average Rates Vs The Fed
We look at interest rates by card category and transaction type to give a clearer view of the interest rate you can expect to pay based on the kind of card you’re using or how you plan to use it. By comparison, the May 2021 data from the Federal Reserve puts the average credit card APR at 14.61%. However, the Fed calculates its rate based on voluntary reporting from 50 credit-card-issuing banks, and it’s unclear what goes into those averages or what types of cards make up those averages.
The Fed also reports an average rate on accounts charged interest , although its calculation gives more weight to accounts with high balances. In May 2021, the average interest rate on credit cards accruing finance charges was 16.30%, down from a record high of 17.14% reported in the second quarter of 2019.
Best Rewards Card For Balance Transfers: Bmo Air Miles Mastercard
Another excellent no-fee card from BMO, the BMO Air Miles Mastercard offers cardholders the same promotional balance transfer rate of 1.99% for the first 9 months with a 1% balance transfer fee. It also offers new cardholders 800 Air Miles, which can be redeemed for travel, merchandise, or in-store discounts at Air Miles partner locations.
If youâre an Air Miles collector, the BMO Air Miles Mastercard can accelerate your Air Miles earning capacity by allowing you to earn with every purchase, as well as double up your points when you shop at Air Miles partner locations. If you like the perks and balance transfer promotion that BMO has to offer, but you prefer Air Miles rewards over cashback, this is the card for you.
Annual Fee: $0
Interest Rate: 19.99% on purchases, 22.99% on cash advances
- 1.99% introductory rate on balance transfers for 9 months with a 1% transfer fee
- 800 bonus Air Miles
- 3 miles for every $25 spent at Air Miles partners
- 1 mile for every $25 spent everywhere else
Travel Insurance: None
- Extended warranty
- Purchase protection
- Up to 25% off rentals at participating National Car Rental and Alamo Rent a Car locations
- 15% off Cirque du Soleil touring shows in Canada, 20% off resident shows in Vegas
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Average Apr Based On Recommended Credit Score
Based on the card offer data collected by The Balance, credit cards marketed to consumers with bad and fair credit scores have an average purchase APR of 23.85%. This is 4.49 percentage points above the 19.36% average APR of cards marketed to those with good or excellent credit.
A good credit score indicates to lenders that you can manage credit cards, loans, or debt repayment. Conversely, cards that accept applicants with lower credit scores charge higher interest rates to make up for the risk of default.
The type of credit score you see advertised on a card offer page is a recommendation. Its a good benchmark, but your credit score is just one of several factors credit card issuers consider when deciding whether or not to approve a card application.
Find Your Apr Through Your Credit Card Issuer’s Website
If you have an online account with your card issuer, you can log in and navigate to your account information section to find the APR associated with your card.
Your card issuer’s website should have the most up-to-date information on APR, making this a smart choice to see what your credit card APR is today.
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How Do I Find The Best Credit Card
When it comes to picking the best credit card for you, you must truly understand your spending habits and credit card eligibility. If you are a new credit card user, then you might want to look for a no-frills credit card to start building your credit score. If youre a small business owner who is looking to make important business investments, then a business credit card will help you better carry out your business purchases. Frequent traveler? A travel card might be more in line with your spending habits and interests.
At RATESDOTCA, you can conveniently compare the top credit cards in Canada by sorting them by features such as interest rates, rewards type and annual fee.
How Credit Card Interest Works
When you borrow money from a bank, you usually have to pay interest, which is the cost to you of using the bank’s money. Credit cards are unusual in that there is a way to avoid interest entirely. Most cards offer a “grace period”: If you pay your balance in full on each statement â meaning you don’t roll over any debt from one month to the next â you won’t be charged interest. If you carry debt, though, you’ll be charged interest. Interest works like this:
Your card issuer sets your interest rate. In general, the better your credit, the more likely you are to qualify for lower rates, but credit card interest rates tend to be significantly higher than rates on other consumer debt.
Your interest rate is listed on your credit card statement. It’s expressed as an annual rate, but in most cases it is charged on a daily basis. So if your interest rate is 17.5% a year, it’s actually charged at about 0.048% per day.
When your billing cycle ends, your issuer calculates how much interest you owe. Your interest charge is based on your daily balances and your daily rate.
The interest charge is included in your next month’s minimum payment. Credit card interest generally does not compound â meaning, it does not get added into your balance. You have to pay your full interest cost each month. Read more about minimum payments.
Â» MORE:How credit card interest is calculated
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What Is An Interest Rate
Card issuers refer to your credit card’s interest as your annual percentage rate . An APR is the interest you’re charged for borrowing money against your credit limit.
In most cases, you won’t be charged interest if you pay off your on time and in full each billing cycle. This applies to new purchases and typically excludes other transactions, such as balance transfers and cash advances, which often incur interest charges right away.
While card issuers express your interest rate annually, you can find the monthly interest rate, if you divide your APR by 12.
Let’s say you have an 18.74% APR: Divide by 12 to get 1.562% as your monthly interest rate. This means that whatever balance you carry on your credit card account will be charged a fee of 1.562% in addition to your payment. If your account balance is $3,000 during the month of July, you will pay $46.86 in interest for that month.
Selecting A Rewards Credit Card
Generally speaking, cards that earn you points are usually best used for travel redemptions. These cards will likely give you other ways to cash out your points, but the majority of the time, you get the most value for your points when redeeming for travel. Similar to cash-back cards, you want to pick a card that gives you the most points on the categories you spend the most money. You also want to figure out what type of travel you prefer; you could get an airline-branded credit card or a hotel-branded one. There are also credit cards that allow you to redeem for any type of travel. Regardless of what you go with, you need to know how the reward programs work so you can maximize your points.
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The High Cost Of A Higher Interest Rate
A higher APR costs you money in two ways:
First, obviously, it increases the amount of;interest charged on your purchases.
Second, because you are paying more in interest, you have less money available to pay down the principal the;debt you actually;put on the card. That means you could stay in debt for a longer time.
Let’s walk through an example and see how a higher;APR affects you at every turn.
1. Your interest charges are higher
If you have excellent credit, you might qualify for a credit card with a super-low rate, let’s say 8%. Meanwhile, a person with bad credit or no credit history at all might only qualify for a “starter” card with an APR of 26%. Let’s say each person carries a $1,000 balance from one month to the next:
The 8% APR card produces an interest charge of about $6.58;in the first month.
The 26% APR card produces an interest charge of about $21.36;in the first month.
2. Your minimum payments are higher
The minimum payment on;a credit card is typically made up of all the accrued interest, plus any fees, plus a percentage of the principal . In this case, let’s say;that percentage is;1.5%.
The 8% APR card;will have a minimum payment of;$21.58;in that first month.
The 26% APR card has a;minimum payment;of about $36.36;the first month.
3. Your;debt;shrinks more slowly
After just one month, the person with the lower APR is about $15 ahead of the person with the higher APR in the “race” to eliminate their debt.
4. You’re in debt longer and pay more to get out
Top Rewards Credit Cards
Chase Freedom UnlimitedÂ®: Bonus cash back in popular categories and a solid 1.5% back on everything else. Read our review of the Chase Freedom UnlimitedÂ®.
CitiÂ® Double Cash Card â 18 month BT offer: Earn 2% cash back on every purchase â 1% when you buy it and another 1% when you pay it off. Read our review of the CitiÂ® Double Cash Card â 18 month BT offer
Chase Sapphire PreferredÂ® Card: Get 2X rewards on travel and dining and a ton of flexibility when redeeming. Great sign-up bonus, too. Annual fee: $95. Read our review of the Chase Sapphire PreferredÂ® Card.
Chase Freedom Flexâ;: Up to 5% cash back in popular categories . Read our review of the Chase Freedom Flexâ;.
Blue Cash PreferredÂ® Card from American Express: Perhaps the ultimate family card, with outstanding cash back on a lot of the necessities of modern life. Annual fee: $0 intro for the first year, then $95. Read our review of the Blue Cash PreferredÂ® Card from American Express.
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What Are The Most Common Features Of Low Interest Credit Cards
Most low interest credit cards come with a no annual fee, and typically no rewards. This is because they are specifically designed to make it easier for you to pay your recurring credit balance. Most low interest credit cards do not offer perks though because the low interest rate itself is considered the perk.
Average Interest Rates By Credit Card Transaction Type
There are three main types of transactions you can use credit cards for: purchases, balance transfers, and cash advances. APRs often vary depending on which of those transactions you make. Some issuers give new cardholders a break by offering low or 0% interest rates on some of those transactions for a limited time.
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Higher Credit Scores Get Lower Interest Rates
According to data from the CFPB’s Consumer Credit Card Market Report, the average total interest paid by consumers increases with lower credit scores.
The CFPB measures this with an effective interest rate calculated as the total amount of interest charged per year divided by the total balance at the end of the cycle to create a metric of how much interest was actually paid by consumers at each credit level. Data from 2018 showed that consumers with the best credit paid the lowest effective interest rates, and vice versa.
|Rewards credit card||13.23%|
Some of the name-brand rewards cards you may be familiar with may also have higher interest rates. Here are a few favorites, and the interest rates they carry. Remember that credit card companies can change interest rates, and that only people with the best credit scores will qualify for the lowest interest rates.;
Top 0% Or Low Interest Credit Cards
CitiÂ® Diamond PreferredÂ® Card: 0% intro APR on Purchases and Balance Transfers for 18 months, and then the ongoing APR of 13.74% – 23.74% Variable APR. Read our review of the CitiÂ® Diamond PreferredÂ® Card.
Chase Freedom UnlimitedÂ®: 0% intro APR on Purchases for 15 months, and then the ongoing APR of 14.99% – 23.74% Variable APR. Read our review of the Chase Freedom UnlimitedÂ®.
Discover itÂ® Cash Back:0% intro APR for 14 months on purchases and balance transfers, and then the ongoing APR of 11.99% – 22.99% Variable APR. Read our review of the Discover itÂ® Cash Back.
BankAmericardÂ® credit card: 0% intro APR for 18 billing cycles on purchases and on any balance transfers made within 60 days of account opening, and then the ongoing APR of 12.99% – 22.99% Variable APR. Read our review of the BankAmericardÂ® credit card.
Wells Fargo Platinum card:0% intro APR for 18 months from account opening on purchases and qualifying balance transfers, and then the ongoing APR of 16.49% – 24.49% Variable APR. Read our review of the Wells Fargo Platinum card.
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What’s The Difference Between Visa And Mastercard
This is one of the most common questions about credit card companies. Just about every place that takes credit cards takes both Visa and Mastercard, with only a couple of exceptions , so consumers are left wondering whether there’s a difference at all.
The most important thing to remember is that neither Visa nor Mastercard issues credit cards. These companies are just payment networks that process transactions. Most of the benefits that come with a card are provided by the card issuer, not the network. And since their acceptance rates are nearly identical, you’re better off focusing on the features of individual cards rather than which network they operate on. Read more about Visa vs. Mastercard.